Product policy decision pdf

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Vijay Hebbalkar. A short summary of this paper. Please note that sometimes the word "product" is used to mean brand and sometimes it refers to the generic product. The classification of consumer goods was discussed previously but I feel that it is necessary to review this in order to understand distribution. Classification of Consumer Goods: Convenience goods— These are goods that consumers want to acquire with virtually no shopping effort. They include: staples milk, bread , impulse items candy, gum, soda, magazine , and emergency goods ambulance, tow truck.

Shopping goods—Customers tend to shop around, i. Examples of shopping goods: computer, suit, coat, printer, sofa, and bedroom set. Specialty goods —Customers are willing to make an extended search to find these goods. In some cases, a customer might be willing to travel 20 or 30 miles to find them.

Convenience goods need intensive distribution. Your product has to be in millions of outlets. Think of how many places you can purchase a newspaper or a cup of coffee. Shopping goods require selective distribution and specialty goods require exclusive distribution. Product Life Cycle Theory This is a theory dealing with generic products, not brands.

A penetration price is a low price. This is usually done in order to keep the competition out. A skimming price is a high price and this enables the company to recoup its investment much sooner since many innovators innovators were discussed in the section dealing with consumer behavior.

They are the first people to try something new. They are willing to take risks because they want to be first. They are the opposite of the laggards are willing to pay a very high price for a new product in order to be first. After many of the innovators have paid the high price, the company then lowers the price. In the Introduction Stage, advertising is used to try to build up primary generic demand for the product, not selective demand for the brand.

Ads are more informative and attempt to explain why one should buy the product relative advantage. Promotional expenditures are high since you are trying to induce trial. You do not begin to make profits until the end of this stage.

Distribution is limited and you have few models from which to choose. Marketing objectives are to gain product awareness and to stimulate trial of the new product. When a product is new, it is the innovators who try it first. They cannot try it unless they are first aware of it. This is why awareness is so important.

Word of mouth and word of mouse are powerful tools to make people aware of new products. Growth: Sales are growing rapidly. Profits tend to peak during this stage. Many firms attempt to enter the industry during this stage.

Customers have more models to choose from and there are major product improvements. Competition causes prices to drop. Advertising tends to stress selective demand, i. Maturity: Market shares become fairly stable, the product's sales growth slows down, and only a few major firms are left in the industry oligopoly.

Prices are now close to costs. Firms compete on the basis of price or sometimes will use advertising to stress emotional appeals. This may be necessary since there are few real differences among brands. Notice that the difference among cigarette brands, for example, is more emotional than actual.

For firms to enter a new growth phase, it is necessary to come up with new uses or to constantly innovate and add exciting new features to the product. The maturity stage is usually the longest stage in terms of time. Most products are in the maturity stage of the product life cycle. It is important to be proactive and come up with ways to extend the product life cycle.

Look at how Arm and Hammer keeps coming up with new uses for its baking soda e. This is important since very few people have time to bake. Do you know what has been the biggest problem for aluminum foil? Takeout foods! If people do not cook, they do not need aluminum foil. This is one reason that Reynolds has modified its product so that it foods such as cake frosting and melted cheese will not stick to it.

Decline: Sales for the product category begin to fall. There are fewer firms in the industry and fewer brands to choose from. Very little is being spent on promotion, and distribution is rather limited.

Products in the decline stage include: typewriters, cloth diapers, 35 mm cameras, black and white television sets, color television sets, VCR, and cassette players. AARP Bulletin June listed several products that were on the verge of obsolescence: answering machines, phone books, bank deposit slips, subway tokens, rolodexes, printed encyclopedias, film, and the incandescent light bulb. Failure is defined differently by different researchers. Furthermore, it depends on the type of product consumer or industrial.

Major reasons for failure of new products i. In fact, some failures are due to poor product positioning. The way a product is positioned can affect its sales. The public was told that it was an alternative to cola soft drinks and it was not just a mixer to be used with scotch.

Positioning Tang as an orange juice limited its market. It is mainly consumed in the morning as an alternative to fresh OJ or concentrate. An alternative way to position it might have been as a soft drink. It is certainly easier to carry home a jar of Tang than several bottles of soda.

Perrier has been positioned as an alternative to soft drinks and alcoholic beverages, not as a substitute for tap water. Note that it does not come in gallon containers.

The Perrier bottle looks like a soft drink bottle and the price is much higher than waters such as Poland Spring. Sick Products—Sometimes existing brands get old and sick. Companies have to consider pruning the product line.

Gardeners prune their rose bushes by cutting off the dying branches. Marketers also have to look at all their brands and decide which need to be pruned. This means eliminating the sick brands, i. Even in academe, departments have to prune their course offerings.

Courses can become obsolete and stale. A dynamic, successful department is always examining and modifying its curriculum. What to do? Some possibilities: 1. Delete the product as soon as possible.

Considerations in dropping the product: a Effects on customers who expect service and replacement parts. For example, if GE were to discontinue selling dryers, this might have an adverse effect on washing machines. Sell the product to another company. Revise your marketing strategy. You might turn the brand into a discount brand which means sell it for a very low price and minimize your promotional expenses.

This was done to Pepsodent toothpaste and Lux soap. You might eliminate the product gradually and milk it for remaining profits. The way to do this is to eliminate all marketing support no advertising or sales promotions such as couponing and continue to sell it. Pepsi is not obsessed with protecting the market share of its flagship brands Pepsi and Lay's potato chips but is concerned with "understanding and catering to changing tastes.

Is this a good idea? This is one way of ensuring that a company's products have appeal to young people and not only appeal to older consumers. Many young people would rather drink water, sports drinks, or tea than cola beverages. The days where cola beverages dominate the soft drink market may be over. We all share core American values but we still are proud of our backgrounds. A savvy marketer knows that there are different subcultures within the United States and Americans are not monolithic.

Ethnic marketing is about understanding the culture of various ethnic groups and marketing in a special way to them. Brands and Trademarks: A brand consists of a brand name and a brand mark. The brand name can be vocalized e.

Trademark means that the brand name or mark has legal protection and has been registered. A trademark can be a word, symbol, mark, or name. The Lanham act specifies what type of names or marks can be registered.

Generic names cannot be registered. For example, the term "ice cream" cannot be registered as part of a company's brand name. Anyone is permitted to use that term. Some names that started out as trademarks and are now generic include: aspirin, corn flakes, zipper, nylon, kerosene, gold card, and escalator.

The public may [incorrectly] use these registered brand names in a generic sense but they are still protected trademarks. The correct generic terms are: photocopy, tissue, wood laminate, gelatin dessert, cola soft drink, and petroleum jelly, respectively. To achieve quick breakeven the companies use skimming technique otherwise use penetration to keep the competition out of the market. Also the focus should be on creating awareness about the product and building the brand.

In growth stage the company needs to maintain its profit by improving the product quality. It takes some time to recreate the advertising strategy.

In maturity stage the very few firms are left in the business. A product change or communication changes is required at this stage. In decline stage the sales for the product begin to fall and very few firms are left in the industry. Hence, this concludes the definition of Product Policy along with its overview.

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